FIG trader_

REITs Trading At Big Premium To Book Value

You need to dig a bit deeper to if you want to be fair to investors you suggest should shy away because of the price/book. Far be it for me to be a shill for the real estate industry, but give credit where credit is due. Add a bit of good fortune in the way of record low interest rates for many years, and you have a recipe for extraordinariness (is that a real word?). First for most REITs (according to tax laws), they must give away something like 90% of net income/CF to maintain the tax beneficial status. In return, invstors get the dividend that is considered return of capital (i.e also lower tax rates). The price/book is not the most valid metric for them (FFO is in the short term, though perhaps not long-term)In some sense it is a game of chicken because they need to continuosly raise debt and equity for expansion since very little is returned. In the long term, there is some vulnerability to interest rate "shocks", something to be concerned about. But is it game over now? Probably not, you are in low return envirnoment (here and elsewhere) and perhaps capitalization rates are lowest in history and leverage the highest across the financial services. But there is lots of smart money and people, and its not like the newbies in the late 80's and early 90s are running the show. You just won't get 15% annual returns, probaly high single digits (and a few flops)